Knight Frank: UK housing market to weaken in 2010

LONDON: UK house prices will end 2% higher in 2009 compared with the start of the year before weakening in 2010, says global property consultancy firm Knight Frank.

However, the market will see a limited rise in prices in 2011, and a more concerted recovery in 2012 led by properties in prime London, which cost between £500,000 and £1 million and country houses in southern England.

“We believe that price falls will be capped at around 3% in 2010,” said head of residential research Liam Bailey of the mainstream UK property market, adding the economy was not in a position to permit a rapid recovery in the short term.

He said that prices would slip due to continued growth in unemployment, allied to wage freezes and tax rises, and a rise in average mortgage rates which will force a number of sales which, in the absence of greater depth of demand, will cause prices to fall.

“We believe that the future improvement in market conditions will continue to be led from London and southern England, particularly from the higher price brackets.

“Strong demand from UK and international buyers will ensure that the central London property market, in particular, will continue to outperform in 2010,” said Bailey.

According to Knight Frank’s forecast, annual growth for central London prices in 2010 will be 3% with a steady increase to 9% in 2011.

“The aggregate growth we are forecasting for central London in the five years to 2014 is 38%, compared to 19% for the UK mainstream market,” said Bailey, adding that confidence in London’s market was boosted by a relative weakness in the Sterling in the medium term, encouraging international demand, and brightening economic prospects in the area.

Elsewhere, the farmland market is forecast to remain on stable footing with prices expected to double to £10,000 per acre by 2015, led by strong demand, including from lifestyle buyers and investors, and lack of land for sale.

“ The recession in the house-building sector means that a significant undersupply of housing is emerging across the whole of the UK; but nowhere is this more pronounced than in the central London boroughs, where housing starts have collapsed by over 50% since 2007,” said Bailey.